THE INDEX / Sweet as sugar

Balrampur Chini Mills: Surging on high prices

Manish Joshi & Sachchidanand Shukla

BALRAMPUR Chini Mills (BCM) has performed exceedingly well during the year ended March 2001 by doubling its net profit. A hike in import duty on sugar to 60 per cent and imposition of restrictions on distribution and sale of imported sugar in the domestic market has effectively sealed the flow of sugar imports into the country.

Moreover, the recovery in sugar prices in the international market has also stemmed the import flow.
Meanwhile, BCM has turned aggressive on the export front. This, coupled with the recovery in domestic sugar prices, has had a positive effect on the company, which is reflected in its improved performance.

The topline has grown by a healthy 56.3 per cent to Rs 574.6 crore, so did total expenditure by 57.8 per cent to Rs 474.7 crore. This was despite a lower increase of around 25 per cent in various expenditures such as raw material, staff cost and other expenditure.

However, the previous year’s closing stock was inflated to the extent of Rs 24 crore, acquired on amalgamation of Babhnan Sugar, that resulted into lower total expenditure and higher profits. Operating profit shot up to Rs 100 crore (Rs 67 crore). After minor changes in interest, depreciation and taxes, the bottomline jumped by 107.3 per cent to Rs 47.8 crore.

BCM is among the country’s more efficient sugar companies, well aided by planned capacity expansion projects and the acquisition of existing companies. It has built up a sizeable crushing capacity over recent years.

After the acquisition of Babhnan Sugar, the company recently merged Tulsipur Sugar with itself. With production capacity of 10,000 tcd at the Balrampur unit and 6,000 tcd at the Tulsipur plant, the company may be a prime beneficiary of the recent government initiative to decontrol the sugar industry.

In a recent move, levy sugar quota applicable to sugar mills was slashed to 15 per cent from 30 per cent. The levy price payable to sugar mills has also been hiked. This development should provide some relief to established sugar companies such as BCM. The recent firm trend in sugar prices and the opportunity to sell more quantity in the free sale market would improve realisations and profit margins of older sugar mills, including BCM.

Federal Bank
The Aluva-based Federal Bank has come out with results on expected lines for the year up to March 2001. The bank is predominantly Kerala-based, as around 80 per cent of its branches are located within the state. The hike in FDI limit to 49 per cent in the banking sector could prop up interest in the bank, given its reach and penetration with a branch strength of about 400, besides sound financials.

Total business grew by 19 per cent to Rs 12,500 crore owing to a smart uptrend in approvals and disbursals. Approvals during the year increased by 18.6 per cent to Rs 7,665.5 crore while disbursals went up by 20.3 per cent to Rs 4854.1 crore.

Interest income went up by 4.2 per cent to Rs 919 crore while interest expenditure by 2.4 per cent to Rs 682 crore. A reduction in the cost of deposits by 85 basis points to 9 per cent was instrumental in lowering the cost of deposits.

Further, the yield on advances as well as investments was maintained at around 13 per cent. As a result, net interest earned jumped by 31 per cent. And the NIE to TIE ratio has witnessed a spurt of over five hundred basis points. Non-interest income however, has dipped 5.4 per cent.

Operating expenses fell by nearly 2 per cent to Rs 175 crore owing to a reduction in payments to and provisioning for employees. OPM improved by over 400 basis points. Net profit shot up by 31.5 per cent to Rs 61 crore. The bank has not provided any information on net NPAs, although it said that it recovered Rs 123 crore worth of NPAs during the year. However, CAR has gone down to 10.3 per cent (11.3 per cent).

Federal Bank plans to achieve total automation by 2002 and has introduced net banking in around 135 branches. Retail products have been repositioned due to a renewed thrust on the segment. FB intends to get into distribution of insurance products that would provide a fillip to its prospects.